Stephen Monrad

I’m getting close to the end of the list of problems with equal pay for all that I wrote down in my August 6th post.

Point 9 in the post points out that controls on wages could result in an increase in self-employment. Instead of charging by the hour and being limited by the wage rules, self-employed people might choose to charge for the delivery of a product. They could then earn a higher than normal income if the wage rules didn’t apply to them.

If nothing is done, self-employed people with valuable skills could potentially earn a lot of money. This would create inequality and motivate people to find ways to convert the work they do to self-employment even if it makes little organizational sense.

Fortunately, there are simple solutions to this problem. Self-employed people could be asked to report the number of hours they work on their tax returns. The form could calculate what their net income was after expenses and compute an effective hourly wage rate. A tax could then be levied to reduce their effective hourly wage to the standard wage.

While this method is simple, enforcement might be a problem if people lie on their tax returns. Self-employed people would have some wiggle room to cheat and earn a higher income. As is done today, the tax department would have to do audits to enforce the rules. On the bright side, there is a limit to how much self-employed people can cheat. There are only 24 hours in the day. People could claim to be working more hours than they actually do. However, there is an unavoidable limit.

While it is a little more complicated to deal with self-employed people. The idea of a standard hourly wage can still be used.